OMB No. 1545-0074 Education Credits

Form 8863

See instructions. Department of the Treasury

Internal Revenue Service

Attachment

Sequence No. 50

Name(s) shown on return Your social security number

Hope Credit. Caution: You cannot take the Hope credit for more than 2 tax years for the same student.

1

2

Lifetime Learning Credit

Form 8863 (2005) (Rev. 1-2006)

Part I

Part II

2

(a) Student’s name

(as shown on page 1

of your tax return)

Cat. No. 25379M

Tentative Hope credit. Add the amounts on line 1, column (f). If you are taking the lifetime learning

credit for another student, go to Part II; otherwise, go to Part III 

7

Add the amounts on line 3, column (c), and enter the total

8

8

Enter the smaller of line 4 or $10,000

9

Subtract line 9 from line 8. If zero or less, stop; you cannot take any

education credits

9

11

15

3

10

10

14

For Paperwork Reduction Act Notice, see page 4.

(f) Enter one-half

of the amount in

column (e)

(e) Add 

column (c) and

column (d)

(d) Enter the

smaller of the

amount in

column (c) or

$1,000**

(c) Qualified

expenses (see

instructions). Do

not enter more

than $2,000* for

each student.

Caution: You cannot

take the Hope credit

and the lifetime

learning credit for the

same student in the

same year.

(a) Student’s name (as shown on page 1

of your tax return)

First name Last name

(c) Qualified

expenses (see

instructions)

Tentative lifetime learning credit. Add lines 6a and 6b and go to Part III

4

5a

4

5a

6c

Part III Allowable Education Credits

7 Tentative education credits. Add lines 2 and 6c

Enter: $107,000 if married filing jointly; $53,000 if single, head of household,

or qualifying widow(er)

Enter the amount from Form 1040, line 38*, or Form 1040A, line 22

If line 10 is equal to or more than line 11, enter the amount from line 7 on line 13 and go to

line 14. If line 10 is less than line 11, divide line 10 by line 11. Enter the result as a decimal

(rounded to at least three places)

12

13 Multiply line 7 by line 12 

14 Enter the amount from Form 1040, line 46, or Form 1040A, line 28 

17

Subtract line 15 from line 14. If zero or less, stop; you cannot take any education credits 

Education credits. Enter the smaller of line 13 or line 16 here and on Form 1040, 

line 50, or Form 1040A, line 31 

13

12 .

(Hope and Lifetime Learning Credits)

(b) Student’s

social security

number (as

shown on page 1

of your tax return)

(b) Student’s social security

number (as shown on page

1 of your tax return)

Enter: $20,000 if married filing jointly; $10,000 if single, head of household,

or qualifying widow(er) 11

* If you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from Puerto Rico, see Pub. 970 for the amount to enter.

Attach to Form 1040 or Form 1040A.

Last name

First name

Caution: You cannot take both an education credit and the tuition and fees deduction (Form 1040, line 34, or Form 1040A, 

line 19) for the same student in the same year.

16

17

15

16

Enter the total, if any, of your credits from Form 1040, lines 47 through 49, or Form 1040A, 

lines 29 and 30

(99)

(Rev. January 2006) 2005

* For each student who attended an eligible educational institution in the Gulf Opportunity Zone, do not enter more than $4,000.

** For each student who attended an eligible educational institution in the Gulf Opportunity Zone, enter the smaller of the amount in

column (c) or $2,000.

b

c

For students who attended an eligible educational institution in the Gulf Opportunity Zone, enter

the smaller of $10,000 or their qualified expenses included on line 4 (see special rules on page 3)

Subtract line 5b from line 5a

6a Multiply line 5b by 40% (.40)

b Multiply line 5c by 20% (.20)

c

5b

5c

6a

6b
Form 8863 (2005) (Rev. 1-2006) Page 2

General Instructions

What’s New

Use Form 8863 to figure and claim your education credits. The

education credits are:

● The Hope credit, and

● The lifetime learning credit.

Who Can Take the Credits

You cannot take the education credits if any of the following

apply.

● Your filing status is married filing separately.

● Your adjusted gross income on Form 1040, line 38, or Form

1040A, line 22, is (a) $107,000 or more if married filing jointly, or

(b) $53,000 or more if single, head of household, or qualifying

widow(er).

● You are claimed as a dependent on another person’s tax

return, such as your parent’s return (but see the Note above).

See Pub. 970, Tax Benefits for Education, for more information

about these credits.

Rules That Apply to Both Credits

Qualified Education Expenses

Generally, qualified education expenses are amounts paid in

2005 for tuition and fees required for the student’s enrollment or

attendance at an eligible educational institution. It does not

matter whether the expenses were paid in cash, by check, by

credit card, or with borrowed funds.

● Course-related books, supplies, equipment, and nonacademic

activities, except for fees required to be paid to the institution as

a condition of enrollment or attendance.

● Room and board, insurance, medical expenses (including

student health fees), transportation, or other similar personal,

living, or family expenses.

● Any course or other education involving sports, games, or

hobbies, or any noncredit course, unless such course or other

education is part of the student’s degree program or (for the

lifetime learning credit only) helps the student to acquire or

improve job skills.

If you or the student take a deduction for higher education

expenses, such as on Schedule A or Schedule C (Form 1040),

you cannot use those expenses when figuring your education

credits.

Qualified education expenses do not include amounts paid for:

Tax-Free Educational Assistance and Refunds of

Qualified Education Expenses

You must reduce the total of your qualified education

expenses by any tax-free educational assistance and by any

refunds of your expenses. If the refund or tax-free assistance is

received in the same year in which the expenses were paid or in

the following year before you file your tax return, reduce your

qualified education expenses by the amount received and figure

your education credits using the reduced amount of qualified

expenses. If the refund or tax-free assistance is received after

you file your return for the year in which the expenses were paid,

you must figure the amount by which your education credits

would have been reduced if the refund or tax-free assistance

had been received in the year for which you claimed the

education credits. Include that amount as an additional tax for

the year the refund or tax-free assistance was received on the

tax line of your 2005 tax return (Form 1040, line 44, or Form

1040A, line 28). Enter the amount and “ECR” next to that line.

Tax-free educational assistance includes a tax-free scholarship

or Pell grant or tax-free employer-provided educational

assistance. See Pub. 970 for specific information.

You may be able to take the credits if you, your spouse, or a

dependent you claim on your tax return was a student enrolled

at or attending an eligible educational institution. The credits are

based on the amount of qualified education expenses paid for

the student in 2005 for academic periods beginning in 2005 and

the first 3 months of 2006.

Note. If a student is claimed as a dependent on another

person’s tax return, only the person who claims the student as a

dependent can claim the credits for the student’s qualified

education expenses. If a student is not claimed as a dependent

on another person’s tax return, only the student can claim the

credits.

Generally, qualified education expenses paid on behalf of the

student by someone other than the student (such as a relative)

are treated as paid by the student. Also, qualified education

expenses paid (or treated as paid) by a student who is claimed

as a dependent on your tax return are treated as paid by you.

Therefore, you are treated as having paid expenses that were

paid from your dependent student’s earnings, gifts, inheritances,

savings, etc.

● You are taking a deduction for tuition and fees on Form 1040,

line 34, or Form 1040A, line 19, for the same student.

Additional Information

● You (or your spouse) were a nonresident alien for any part of

2005 and the nonresident alien did not elect to be treated as a

resident alien.

Any qualified expenses used to figure the education

credits cannot be taken into account in determining

the amount of a distribution from a Coverdell ESA

or a qualified tuition program that is excluded from

gross income.

Qualified education expenses must be reduced by

any expenses paid directly or indirectly using

tax-free educational assistance. See Tax-Free

Educational Assistance and Refunds of Qualified

Education Expenses on this page. CAUTION

CAUTION

Example. You paid $8,000 tuition and fees in December 2004,

and your child began college in January 2005. You filed your

2004 tax return on February 2, 2005, and claimed a lifetime

learning credit of $1,600. After you filed your return, your child

dropped two courses and you received a refund of $1,400. You

must refigure your 2004 lifetime learning credit using $6,600 of

qualified expenses instead of $8,000. The refigured credit is

$1,320. You must include the difference of $280 on your 2005

Form 1040, line 44, or Form 1040A, line 28.

Change to computation of Hope Credit. To simplify Part I, we

have changed the method of figuring the Hope credit. Follow the

instructions under Specific Instructions, Part I.

Purpose of Form

Katrina Emergency Tax Relief Act of 2005. This Act provides

tax relief for persons affected by Hurricane Katrina. Under the

Act, you may still qualify for an education credit even though you

were prevented from completing your normal school term. See

Publication 4492, Information for Taxpayers Affected by

Hurricanes Katrina, Rita, and Wilma.

Credits expanded for Gulf Opportunity Zone students. For tax

years beginning in 2005 and 2006, the education credits have

been expanded for students attending an eligible education

institution in the Gulf Opportunity Zone (GOZ students). The

Hope credit for a GOZ student is increased to 100% of the first

$2,000 in qualified education expenses and 50% of the next

$2,000 of qualified education expenses for a maximum credit of

$3,000 per student. The lifetime learning credit rate for a GOZ

student is increased from 20% to 40%. The definition of

qualified education expenses for a GOZ student also has been

expanded. See Special Rules for Gulf Opportunity Zone Students

on page 3.
Form 8863 (2005) (Rev. 1-2006) Page 3

Specific Instructions

Part I

Hope Credit

Line 1

Complete columns (a) through (f) on line 1 for each student who

qualifies for and for whom you elect to take the Hope credit.

Column (c)

For each student, enter the amount of qualified education

expenses remaining after reduction by certain tax-free amounts

and refunds, as explained earlier. The expenses must have been

paid for the student in 2005 for academic periods beginning

after 2004 but before April 1, 2006, as explained under Prepaid

Expenses. If the student’s expenses are more than $2,000

($4,000 if a GOZ student), enter $2,000 ($4,000 if a GOZ

student). You may use the worksheet on the next page to figure

the correct amount to enter in column (c).

Note. If you have more than three students who qualify for the

Hope credit, enter “See attached” next to line 1 and attach a

statement with the required information for each additional

student. Include the amounts from line 1, column (f), for all

students in the total you enter on line 2.

● The student was taking at least one-half the normal full-time

workload for his or her course of study for at least one academic

period beginning in 2005.

● The student has not been convicted of a felony for possessing

or distributing a controlled substance.

If a student does not meet all of the above

conditions, you may be able to take the lifetime

learning credit for part or all of that student’s

qualified education expenses instead.

● The student was enrolled in 2005 in a program that leads to a

degree, certificate, or other recognized educational credential.

You may be able to take a credit of up to $1,500 ($3,000 if a

GOZ student) for qualified education expenses (defined earlier)

paid for each student who qualifies for the Hope credit. The

Hope credit equals 100% of the first $1,000 ($2,000 if a GOZ

student) and 50% of the next $1,000 ($2,000 if a GOZ student)

of qualified expenses paid for each eligible student. You can

take the Hope credit for a student if all of the following apply.

● As of the beginning of 2005, the student had not completed

the first 2 years of postsecondary education (generally, the

freshman and sophomore years of college), as determined by the

eligible educational institution. For this purpose, do not include

academic credit awarded solely because of the student’s

performance on proficiency examinations.

● The Hope credit was not claimed for that student’s expenses

in more than one prior tax year.

An eligible educational institution is generally any accredited

public, nonprofit, or proprietary (private) college, university,

vocational school, or other postsecondary institution. Also, the

institution must be eligible to participate in a student aid

program administered by the Department of Education. Virtually

all accredited postsecondary institutions meet this definition.

Eligible Educational Institution

You cannot use any amount paid in 2004 or 2006 to

figure your 2005 education credits.

CAUTION

Qualified education expenses paid in 2005 for an academic

period that begins in the first 3 months of 2006 can be used in

figuring your 2005 education credits. For example, if you pay

$2,000 in December 2005 for qualified tuition for the 2006 winter

quarter that begins in January 2006, you can use that $2,000 in

figuring your 2005 education credits (if you meet all the other

requirements).

Prepaid Expenses

Special Rules for Gulf Opportunity Zone Students

The following rules apply only to students attending an eligible

educational institution in the Gulf Opportunity Zone (GOZ), which

includes the following areas in three states.

Alabama. The counties of Baldwin, Choctaw, Clarke, Greene,

Hale, Marengo, Mobile, Pickens, Sumter, Tuscaloosa, and

Washington.

Louisiana. The parishes of Acadia, Ascension, Assumption,

Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia,

Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche,

Livingston, Orleans, Plaquemines, Pointe Coupee, St. Bernard,

St. Charles, St. Helena, St. James, St. John the Baptist, St.

Martin, St. Mary, St. Tammany, Tangipahoa,Terrebonne,

Vermilion, Washington, West Baton Rouge, and West Feliciana.

Mississippi. The counties of Adams, Amite, Attala, Choctaw,

Claiborne, Clarke, Copiah, Covington, Forrest, Franklin, George,

Greene, Hancock, Harrison, Hinds, Holmes, Humphreys,

Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper,

Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes,

Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl

River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone,

Walthall, Warren, Wayne, Wilkinson, Winston, and Yazoo.

All of the other rules discussed on page 2 (as modified by

these rules) must still be met. The Hope credit for a GOZ student

is 100% of the first $2,000 in qualified education expenses and

50% of the next $2,000 of qualified education expenses for a

maximum credit of $3,000 per student. The lifetime learning

credit rate for a GOZ student is 40%.

The definition of qualified education expenses is expanded for

GOZ students. In addition to tuition and fees required for

enrollment or attendance at an eligible educational institution,

qualified education expenses for a GOZ student include the

following.

1. Books, supplies, and equipment required for enrollment or

attendance at an eligible educational institution.

2. For a special needs student, expenses that are necessary

for that person’s enrollment or attendance at an eligible

educational institution.

3. For a student who is at least a half-time student, the

reasonable costs of room and board, but only to the extent that

the costs are not more than the greater of the following two

amounts.

a. The allowance for room and board, as determined by the

eligible educational institution, that was included in the cost of

attendance (for federal financial aid purposes) for a particular

academic period and living arrangement of the student.

b. The actual amount charged if the student is residing in

housing owned or operated by the eligible educational

institution.

You will need to contact the eligible educational institution for

qualified room and board costs.

TIP
Form 8863 (2005) (Rev. 1-2006) Page 4

Part II

Lifetime Learning Credit

Line 3

Complete columns (a) through (c) for each student for whom you

are taking the lifetime learning credit.

Column (c)

For each student, enter the amount of qualified education

expenses remaining after reduction by certain tax-free amounts

and refunds, as explained earlier. The expenses must have been

paid for the student in 2005 for academic periods beginning

after 2004 but before April 1, 2006, as explained under Prepaid

Expenses. You may use the worksheet on this page to figure the

correct amount to enter in column (c).

Note. If you are taking the lifetime learning credit for more than

three students, enter “See attached” next to line 3 and attach a

statement with the required information for each additional

student. Include the amounts from line 3, column (c), for all

students in the total you enter on line 4.

You cannot take the lifetime learning credit for any

student for whom you are taking the Hope credit.

The maximum lifetime learning credit is $4,000 for GOZ students

and $2,000 for all other students, regardless of the number of

students. If you are claiming a credit for both GOZ students and

other students, the qualified education expenses taken into

account in Part II for other students cannot exceed $10,000

reduced by the qualified education expenses of the GOZ

students.

CAUTION

Paperwork Reduction Act Notice. We ask for the information

on this form to carry out the Internal Revenue laws of the United

States. You are required to give us the information. We need it

to ensure that you are complying with these laws and to allow us

to figure and collect the right amount of tax.

You are not required to provide the information requested on

a form that is subject to the Paperwork Reduction Act unless the

form displays a valid OMB control number. Books or records

relating to a form or its instructions must be retained as long as

their contents may become material in the administration of any

Internal Revenue law. Generally, tax returns and return

information are confidential, as required by Internal Revenue

Code section 6103.

The average time and expenses required to complete and file

this form will vary depending on individual circumstances. For

the estimated averages, see the instructions for your income tax

return.

If you have suggestions for making this form simpler, we

would be happy to hear from you. See the instructions for your

income tax return.

Printed on recycled paper

Qualified Education Expenses Worksheet 

(Do a separate worksheet for each student)

1. Total qualified education expenses

2. Less adjustments:

a. Tax-free educational assistance

b. Refunds of qualified education expenses

c. Other adjustments (see Pub. 970)

3. Total adjustments (add lines 2a–2c)

4. Qualified education expenses 

(subtract line 3 from line 1 (enter 

on Form 8863, Part I or II, column (c))